America is living through an inflationary crisis that was not unlike the 1970s. Politically, we are living through something unique. Censorship, extreme rhetoric, and a widening schism could cause significant harm to America’s future. While there are a few economic differences from the 1970s, the underpinnings are essentially the same. In 1970 and 1971, inflation averaged between 4% and 6%. Almost everyone agrees that to stop inflation, prices must be kept from rising.
In 1970, Congress passed The Economy Stabilization Act, giving the executive branch extraordinary powers to enforce wage and price controls. Since then, partisan ideas about what works and doesn’t work have caused significant damage to America’s economy, society, and trust in both the government and the media (more on that in just a bit).
The law and its execution failed miserably. In 1974, inflation hit 10% and hit a high soon after of 12%. Here’s the relevance to today… by the early 70s, a slew of data showed inflation occurs when the government increases the money supply. It’s known as monetarism. Famed Nobel prize-winning economist Milton Friedman created the economic theory. He noted that rising prices weren’t the cause of inflation. Rather. Rising prices were a symptom of the inflation of the money supply.
Presidents Richard Nixon and Gerald Ford based their solution to inflation on a flawed belief that inflation was a psychological phenomenon instead of a monetary problem. In the early 1980s, Federal Chairman Paul Volker gave Friedman’s award-winning ideas a chance. He reduced the amount of money flowing into the market by drastically increasing the Federal Reserve interest rate. Within a few years, it worked. It created a stable currency and fueled a two-decade run of economic prosperity.
Here’s the psychological crisis — Today, it appears America can’t use data to solve problems. Instead, it relies on philosophy and emotions exhibited through partisanship. The fact is, the quality of political ideas is as important as the quality of our political leaders and those who vote for them.
Leo Tolstoy wrote War and Peace (1865-69) and Anna Karenina (1875-77). Many consider them among the finest novels ever written. He also coined what is known as The Tolstoy Syndrome.
“The simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of a doubt, what is laid before him.”
A way of expressing this view is through the term “confirmation bias,” which seeks and acknowledges those facts that confirm an individual’s worldview while ignoring and dismissing evidence that conflicts with that worldview.
During the height of the COVID-19 pandemic, ample data showed school lockdowns hurt kids, and the economy was being harmed in real-time. There were warnings against flooding the economy with trillions of dollars of government debt, locking down society and businesses, and giving away free money.
In the end, numerous conservative states emerged stronger from the pandemic than more liberal ones that continued with some form of government controls. Making matters worse, prominent Democratic economist Larry Summers, who headed the Treasury Department under Bill Clinton, warned congressional Democrats not to pass the American Rescue Act in March 2021. He said the injection of nearly $2 trillion into the economy would spark inflation and wasn’t needed. Democrats dismissed him and didn’t listen. They said it wouldn’t harm the economy and that the government needed to help people.
What the Left did was take a bad situation that the government helped cause and make it even worse for those they claimed they were trying to help. Now that the free money is gone, those on the bottom half of the economic scale are paying the price for the massive inflation, which is now driven by a complex set of issues mixed up into one. Energy policies are driving sky-high gas and utility prices, food is growing more expensive, and soon jobs will follow as people begin cutting back as their discretionary incomes tank. The situation is much more dire for those with no discretionary income.
In the spring of 2021, inflationary warning signs were ringing. Still, President Joe Biden and Federal Reserve Chairman Jerome Powell insisted for months that the rising prices were transitory and temporary. The rest, as they say, is history.
Here’s the interesting part, even when things turn out as predicted, voters still locked in on their team despite the obvious. It appears that the 2022 midterm election results prove the point. Despite over 70% of the country saying America is on the wrong track and Biden’s poll numbers among the worst of any president over the last 100 years, the party in power had the best election results among any in American history.
Why has partisanship gripped America so intensely?
During the 2004 presidential election, Professor Drew Westen led a team at Emory University to study why voters avoid evidence that doesn’t fit their beliefs. They connected thirty men to a brain-scanning machine and asked them to access a number of statements by President George W. Bush and Democratic challenger John Kerry. The statements were of the two candidates contradicting themselves.
As one might expect, Republicans highly criticized Kerry and Democrats did the same for Bush. They let their candidate’s inconsistencies slide. The study found that the area of the brain associated with reasoning wasn’t active when judging the candidates’ statements. Instead, the areas of the brain that process emotions and moral judgments lit up. Dr. Western came to the following conclusion.
“Essentially, it appears as if partisans twirl the cognitive kaleidoscope until they get the conclusions they want, and then they get massively reinforced for it, with the elimination of negative emotional states and activation of positive ones.”
To make matters worse, the media reinforces confirmation bias instead of objectively reporting the facts.
So, here’s the reality:
- Politicians place influential policymakers around them that reinforce their views.
- The media repeats the political narratives and, in some instances, creates them.
- Voters listen to news or entertainment outlets that will strengthen their confirmation bias.
- Rinse and repeat
What happens — Emotional partisanship takes over.
While that may be a simplistic take, it captures the point of America’s psychological crises. The fact is that the quality of ideas leads to positive or negative outcomes. Today, politicians are too busy reinforcing bad ideas because it benefits them politically. The other team can’t possibly be right about anything, despite how obvious the solution may be. When they do, voters buy into the narrative they are traitors and punish those who may agree with a good idea from the other side.
So, did the chicken or the egg come first?
America’s polarization is trapping it into a cycle of failure. There is ample evidence that the less the government does for citizens, the more they do for one another. Of course, that would strip politicians and political parties of their power as the people assert it for themselves.
America won’t be able to pursue the ideals of America’s founding document of forming a “more perfect union” if we continually chase the worst ideas or reject good ones because the other team came up with them.
Why is the social media censorship issue so precarious? When the quality of ideas is diminished, debate is cut off from those who disagree with one another. When we ignore evidence that challenges our preconceived notions, we all lose.
The truth is Biden is wrong that so-called MAGA Republicans threaten democracy. The threat is cutting people off from participating in it through their right to free speech and expression. The danger is from:
- An intrusive and ever-expanding government in our everyday lives.
- Politicians that demagogue in fear.
- A media that reports that reinforce the rhetorical political fear.
- Confirmation bias’ that voters don’t challenge.
- A perpetual cycle that is growing worse every four years.
The question is, could the cycle ultimately break the country in a way past conflicts couldn’t?
